Image of South Korean presidential candidate threatened by ties to former business partner

AFP , SEOUL

Prosecutors yesterday awaited a court-approved arrest warrant for a former business partner of South Korea's leading presidential candidate Lee Myung-bak over alleged major fraud, officials said.

The Seoul prosecutors' office asked for the warrant late on Saturday so it could detain Kim Gyeong-jun for further questioning about alleged share manipulation and embezzlement of millions of dollars, it said.

Kim has been questioned since being extradited from Los Angeles on Friday.

Under South Korean law, prosecutors need court approval to question a suspect for more than 48 hours. The Seoul court was expected to decide on Kim's arrest warrant later yesterday.

"Prosecutors formally asked the Seoul district court to issue an arrest warrant for Kim late Saturday," an official at the prosecutors' office said on condition of anonymity.

"Early Sunday, Kim decided to drop a chance to challenge his arrest at the court. The court has put our request under its scrutiny. We hope the court will give its approval today," the official said.

The Korea Times newspaper on Saturday called Kim's case a ticking "time bomb" for Lee, a 66-year-old wealthy former construction executive and ex-mayor of Seoul, against whom opponents have alleged wrongdoing.

Lee denies all accusations.

While being escorted to the prosecution office for a second day of questioning on Saturday, Kim said he had brought "something" for investigators, but did not elaborate.

Kim, 41, set up an asset management company called BBK in 1999. A year later, he established a separate financial company in which Lee invested.

Kim allegedly manipulated the share price of a third investment firm, a successor of BBK, by spreading false rumors of a merger with foreign companies and caused its investors to lose 60 billion won (US$65.6 million).

He is then accused of embezzling 38 billion won before fleeing to the US on a forged passport in December 2001.

Lee's political opponents suggest he was also involved in the business wrongdoing, but he insists he was a victim and lost around three billion won.

Lee's conservative opposition Grand National Party, eager to return to power after a decade of liberal governments, has vowed to fight "vicious smear campaigns" against its candidate.